MOSUL, Iraq Islamic State has arrested dozens of Mosul shop owners accused of raising food prices in the nearly besieged city, to tamp down discontent as a U.S.-backed offensive closes in on the group's last major stronghold in Iraq, residents said on Monday.The arrests took place on Sunday morning in Bursa, a commercial district in the western part of the city, said a witness who asked not be identified as Islamic State punishes with death those caught communicating with the outside world.About 30 shop owners in the area were arrested and taken away blindfolded to unknown destinations, he said.The Sunni hardline group is relentlessly cracking down on people who could help the biggest ground offensive in Iraq since the U.S-led invasion that toppled Saddam Hussein in 2003.Most of the people executed previously in Mosul were former police and army officers, suspected of disloyalty or plotting rebellions against the militants' rule. The arrest of the shop owners is meant as a warning to retailers to refrain from price hikes that would cause unrest in the city. Some 100,000 Iraqi government troops, Kurdish security forces and mainly Shi'ite militiamen are participating in the assault on Mosul, with air and ground support from a U.S.-led international military coalition.Six weeks into the campaign, troops have so far entered about a quarter of the city on its eastern outskirts, but are moving slowly to avoid civilian casualties and have yet to enter the half of the city on the west bank of the Tigris River.More than a million people are still believed to live in parts of Mosul under the control of the fighters, who seized the largest city in northern Iraq as part of a lightning advance across a third of the country in 2014.

Retail prices rose in Mosul last week after Popular Mobilisation, a force of mainly Iranian-backed pro-government Shi'ite paramilitaries, cut the road linking the Iraqi and Syrian parts of the "caliphate", Mosul's main supply route.The Shi'ite groups are attacking militants deployed between Mosul and Tal Afar, 60 kilometers (40 miles) to the west, trying to complete Mosul's encirclement, with the army and Kurdish security forces controlling access from the other three sides. '1,000 MILITANTS DEAD'

The Iraqi military estimates there are 5,000-6,000 insurgents in Mosul, dug in amid civilians to hamper air strikes, resisting the advancing troops with suicide car bombs and sniper and mortar fire that also kill civilians. Islamic State leader Abu Bakr al-Baghdadi, believed to be somewhere near the Syrian border, has told his fighters there can be no retreat from the city.Iraqi special forces have killed nearly 1,000 militants so far, Major General Abdul Ghani al-Asadi, a commander of elite counter-terrorism troops told Reuters.Some 74,000 civilians have fled Mosul so far, and the United Nations is preparing for a worst case scenario which foresees more than a million people made homeless as winter descends.

A Reuters correspondent in eastern Mosul saw civilians fleeing fighting in one of the districts."Daesh fighters are going around on foot from house to house while the army fights them," said a man called Bashar."All civilians are leaving the area, shops are closed," he said, standing next to his two veiled wives, seven children and 70 year old mother.In the nearby Aden district, recently recaptured by the elite counter terrorism troops, people came out of their house to greet officers, the Reuters correspondent reported. "We are so glad that Daesh is gone," said a retired civil servant standing in front of his house, referring to Islamic State by an acronym."We will stay here but we haven't had water or electricity for two weeks," he said, echoing a general concern among residents about shortages adding to their hardship. (Writing by Maher Chmaytelli; Editing by Patrick Markey and Peter Graff)

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